Amoco Paying Too Little for Dome, Study Says

CALGARY, Alberta — A confidential study commissioned by some unsecured creditors of Dome Petroleum Ltd. has found the financially troubled company is worth at least $385 million more than Amoco Canada Petroleum Co. Ltd. is offering, bank sources said.

The study was presented to unsecured lenders at meetings late last month in New York and Paris to help them assess the terms Amoco has proposed for their Dome loans--worth an estimated $615 million or roughly one-eighth of Calgary-based Dome’s total $4.85-billon debt.

The two-volume report says Amoco drove a hard bargain last April by convincing Dome to accept its $4-billion takeover plan, the sources said late last week.

The proposal, which hinges on shareholder and creditor approval, would provide secured lenders with an average 88.5 cents for every dollar owed and unsecured creditors with about 35 cents.

The study says U.S.-owned Amoco should have paid at least $4.3 billion and possibly as much as $4.7 billion. It was conducted by Lancaster Financial Inc., a Toronto Merchant bank that is well-known for its expertise in evaluating potential mergers and acquisitions.

Lancaster was hired in July by a committee representing more than 25 of Dome’s unsecured lenders. The committee has five members: Canada Trustco Mortgage Co., Chase Manhattan Bank, Credit Lyonnaise, Lloyds Bank of Canada and Barclays Bank of Canada.

Each committee member and Dome signed a confidentiality agreement that is in intended to stop them from revealing details of the report, but two people who had seen it confirmed its ultimate conclusion--that Amoco paid at least $385 million below market value.

Official committee spokesmen were not available or refused comment Friday. Amoco representatives also declined to be interviewed.

Dome’s spokesman David Annesley said on Friday that he has not seen the report, but suggested it places a higher price on Dome because its assessment was made in August--four months after the Amoco author and at a time when crude oil prices were about $2.50 a barrel higher.

Glen Roane, the Lancaster director who led the Dome assessment team, refused to say what price his company has placed on Dome. But he said it would have been easy for anyone evaluating the company in August to make his calculations using April oil prices.

Virtually all of Dome’s debt has been in technical default since June 30 when its interim repayment agreement with creditors expired, the company has said. The company abandoned efforts to negotiate an extension when the Amoco offer was accepted, but creditors have kept the deal up in the air by refusing to endorse it.

Members of a New York-based syndicate of secured creditors owed $770 billion said earlier this month that Amoco has offered an extra three cents for every dollar owed and said it appears the company is ready to make the same proposal to every lender, they said. Amoco will only say negotiations are continuing.

The purchase contract includes a clause that enables Dome to back out of the deal after Nov. 30 if its chances of winning shareholder and creditor approval appear hopeless. Amoco can also abandon its offer next March. But both sides have indicated that they will push ahead anyway.